IRA FAQs

General

An IRA is a tax-deferred retirement account which allows an individual to set aside a certain dollar amount per year for their retirement. The earnings accrue tax-deferred until withdrawals begin at age 59 ½ or later.

IB offers a wide range of IRAs, including:

  • Traditional
  • Traditional Rollover
  • Traditional Inherited
  • Roth
  • Roth Inherited
  • Simplified Employee Pension (SEP)

For complete descriptions of all of IB's available IRA accounts, see the IRA Information page.

Beginning January 1, 2017, there are no custodian or termination fees applied to any IRA where IBLLC is your custodian.

A Traditional IRA (Individual Retirement Account) is a self-sponsored retirement savings plan. Contributions to an IRA may or may not be tax-deductible depending on your adjusted gross income. Consult your tax advisor to answer questions about your eligibility for tax deductions.

A conduit IRA is a separate IRA (i.e., non-commingled) account established to receive a distribution from a qualified plan having certain characteristics worth preserving. A good example is a rollover from a 403(b) tax-sheltered annuity into an IRA. Such an IRA may not be rolled back into a 403(b) account at a later date if your funds have been commingled with other IRA monies. A conduit IRA preserves the flexibility to roll the monies back into the original plan and take advantage of loans or other features not available in an IRA. There are no special requirements to establish a conduit IRA. It is only necessary to ensure that the monies are not commingled with any other IRA monies.

The Taxpayer Relief Act of 1997 created the Roth IRA, which allows tax-free withdrawals after age 59 1/2, provided certain guidelines are met. Please refer to the IRS website www.irs.gov for details of the Roth IRA guidelines and contribution amounts. Contributions to a Roth IRA are not deductible and the maximum annual contribution in 2016 is the lesser of 100% of compensation or $5,500. Taxpayers who are age 50 or older may contribute an additional $1,000. Non-working spouses may also contribute up to $5,500 ($6,500 if age 50 or older) to a Roth IRA. Contributions may be made beyond age 70½. There are no required minimum distributions on Roth IRAs.

Yes, you can. Remember that you can only contribute up to $5,500 per year, or $6,500 per year if you are age 50 or older, to any combination of Traditional and Roth IRAs that you have.

A tax-sheltered annuity (TSA), also known as a 403(b) plan is named after a section of the Internal Revenue Code. It is an employer sponsored retirement savings program. Participation is limited by law to employees of public educational organizations and certain nonprofit organizations. The vast majority of participants are teachers in public schools, colleges and universities.

Go to the IB home page and select Open an Account for an Individual.

Stocks, covered call writing (covered shares are restricted), buying calls (funds equal to the aggregate exercise value of the long calls are restricted), and buying puts (shares subject to exercise are restricted), selling cash secured puts, and spreads securities with European style expiration. The IB IRA is structured as a Stock Cash Account (if you choose to trade only stocks) or as a Stock Options Level I Account (if you choose to trade options in your IRA).

IB IRA account holders benefit from the same low commission rates as other IB customers.




Contributions

You can contribute to a traditional IRA if you have earned income and are under the age of 70½. If you are not employed, but have a spouse who is, your spouse may be able to make a contribution on your behalf.

Generally, you can contribute the lesser of $5,500 ($6,500 if you are age 50 or over) or your taxable compensation for the year. This limit is the most that can be contributed to all your combined IRAs, Traditional or Roth, for a given year.

Yes. You can contribute to a Roth IRA or Traditional IRA regardless of whether or not you have an employer-sponsored plan. In fact, IRAs are a great way to enhance your savings.

While participation in a retirement plan does not change how much you can contribute to an IRA, it can affect whether or not you're eligible to deduct your contributions to a Traditional IRA on your tax return. Keep in mind that as long as you're under age 70½ and you have earned compensation, you can always make nondeductible contributions to a Traditional IRA and benefit from tax-deferred earnings.

The name says it all, catch-up contributions are specifically designed to help those who are getting closer to retirement catch up on their retirement savings. You're eligible as long as you're at least 50 years old during the year the contribution is for, and of course, as long as you meet the eligibility requirements for traditional or Roth IRAs.

Eligibility to make Roth IRA contributions are determined by your Modified Adjusted Gross Income (MAGI):

MAGI Contribution

2014 2015
Single Filers
< $114,000 Full Contribution
$114,001-$129,000 Partial Contribution
> $129,000 Ineligible
Single Filers
< $116,000 Full Contribution
$116,001-$131,000 Partial Contribution
> $131,000 Ineligible
Married Filing Joint
< $181,000 Full Contribution
$181,001-$191,000 Partial Contribution
> $191,000 Ineligible
Married Filing Joint
< $183,000 Full Contribution
$183,001-$193,000 Partial Contribution
> $193,000 Ineligible

To see if you're eligible to make a Roth IRA contribution, consult your tax advisor or see IRS Publication 590.

Yes, provided the contribution does not exceed your earned income for the year and you meet AGI eligibility guidelines.

No, contributions to a Roth IRA are not tax-deductible.

Fed fund wires, ACH or checks are currently the only available deposit options. Before you contribute or transfer funds, you must fill out an IRA Deposit Form. Click here for instructions on sending funds for IRAs.

Your Employer contributions may be completed by your tax filing deadline, including extensions, for a given tax year. Employee contributions follow the same rules as Traditional IRAs.

The election for a prior year contribution is available from January 1 to April 17.




Distributions

To withdraw funds, complete our Withdrawal Instructions form under Account Management. Customers may request Normal, Early with no Exception, Death, and Excess Contribution Removal. Please choose the correct Distribution type on Withdrawal Instructions form under Account Management. You will need to also specify the amount of withdrawal and tax withholding instructions.

You may withdraw funds from your IRA at any time but in general, withdrawing funds from your IRA prior to age 59 ½ means you'll have to pay a 10% early withdrawal penalty. You may avoid the penalty if you're withdrawing because of:

  • First time home purchase ($10,000 lifetime limit)
  • Qualified education expenses
  • Substantially Equal Periodic Payments
  • To pay for health insurance premiums if you receive unemployment benefits for more than 12 consecutive weeks
  • Medical Expenses in excess of 7.5% of your AGI (Adjusted Gross Income)
  • Death
  • Disability
  • IRS Levy

Please speak to your tax advisor prior to taking a distribution to determine whether the 10% early withdrawal penalty will apply.

Yes. If your account balance is sent directly by the plan administrator to another qualified plan or to an IRA trustee/custodian on your behalf, the 20% withholding tax requirement does not apply. You may also actively opt out of the mandatory 20% withholding by so indicating on your distribution request. Remember that opting out of the mandatory withholding does not eliminate the tax liability associated with IRA distributions.

When may I withdraw my Roth IRA earnings income tax free?
Roth IRA earnings may be withdrawn tax-free if your Roth IRA has been established for at least five years and one of the following apply:

  • Age 59 ½
  • Disability
  • Death
  • First time home purchase ($10,000 lifetime limit)

You're not required to take distributions from a Roth IRA as long as you live. You can allow your money to grow in a Roth IRA free of current taxes for as long as you choose.

In a traditional IRA, you are required by law to begin taking distributions from your IRA in the year you reach age 70½. The amount of the distribution is based on your age and the value of your account. Internal Revenue Service Publication 590 provides the information to calculate the minimum distribution. Required minimum distributions must start no later than April 1 of the year following the year in which you attain age 70½. Failure to take the required minimum distribution results in an IRS penalty tax of 50% of the amount that should have been distributed.

Distributions from a Traditional IRA are treated as income to you. You will receive an IRS Form 1099-R summarizing the amount distributed and the taxes withheld, if any. In a Roth IRA, if you take a distribution after the account has been open five years, the distribution will not be included in your income. If taken within the 5-year period, it will be taxable, like a Traditional IRA distribution.

An "early" withdrawal is generally one taken before age 59½ in a traditional IRA or within the first five years of a Roth IRA. In addition to the amount added to your income, the IRS may assess an additional 10% penalty. You should consult with your tax advisor regarding the tax consequences.

Yes, there is no restriction to the number or frequency of IRA distributions. Please consult with your tax advisor as to the impact of distributions on your specific situation.

No, both deposits and withdrawals in an IRA account are limited to USD.




Rollover/Transfers

A direct rollover is a distribution from a qualified retirement plan such as a pension, profit-sharing, Keogh (HR-10), or 403(b) Tax-Sheltered Annuity program, which is sent on your behalf directly to a new trustee/custodian. A direct IRA rollover can be accomplished by asking the administrator of your qualified plan to make the distribution directly to the new trustee/custodian. Only one direct rollover from an IRA account to another IRA account is permitted in any one-year period. Values distributed from a qualified retirement plan, which are not directly rolled over into an eligible qualified plan or IRA are subject to a 20% federal withholding tax.

You may move IRA assets from an IRA or qualified plan through a transfer or a rollover. A direct transfer of cash or assets from an IRA or qualified plan to new IB IRA account is generally tax-free and does not constitute a rollover. A rollover is a tax-free distribution of cash or assets from an IRA or qualified plan that you contribute to a new IB IRA account within a 60 day period to complete the rollover transaction. While the rules for rollovers and transfers differ, they accomplish similar objectives. Both rollovers and transfers facilitate the tax-free movement of IRA monies from one trustee or custodian to another.

One kind of IRA rollover involves moving monies from an existing IRA account to another IRA account, and another requires a distribution from a qualified pension, profit-sharing, or 403(b) tax-sheltered annuity plan. In either case, you have 60 days in which to complete the rollover. One IRA rollover per 12 calendar months is permitted.

Yes. A rollover takes place when the IRA funds are paid directly to you and re-deposited (roll-over) into an IRA within 60 calendar days of receipt. The 60-day period begins the day after you receive the payment. A rollover transaction from an IRA may not occur more than once during a 12-month period. This 12-month rule applies to each separate IRA you own and is determined from the date the IRA funds are received. (The 12-month limitation does not apply if the funds are transferred directly from one financial organization into another or if they are rolled over or directly rolled over from a Qualified Plan into an IRA).

Open an IB Rollover IRA and in the funding section a letter will be created that informs your benefits administrator that you would like to directly roll over your distribution into your IB Rollover IRA account. You will have to sign a form authorizing the move. Next, your employer will transfer your payout to your IB IRA account, or they will provide you with a check made out to IB. If the latter is the case, once you receive the check you should deposit it immediately into your IB Rollover IRA. The deposit must be within the time frame permitted under the Internal Revenue Code.

Interactive Brokers Automated Customer Account Transfer Service (ACATS) is the National Securities Clearing Corporation's (NSCC) central processing system for the transfer of positions and accounts between brokerage firms that are participants of the NSCC's ACATS program. The NSCC's ACATS system enables your broker to enter, review, and settle account transfers in a fully automated system. A request for an Automated Customer Account Transfer (ACAT) of assets must be sent to the receiving broker. Your IB account must be opened and approved before you begin the ACAT.

Under normal circumstances, an ACAT should take between four to eight business days. With some circumstances, such as an attempt to transfer unsettled funds, positions that are not paid in full, or restricted stock shares, this process could take longer. The ACAT feature is available under Account Management. Choose Deposit Instructions from the customer menu. You will be prompted to select the firm and account number at the firm.

Interactive Brokers provides paper transfer forms for IRA Rollovers and Trustee-to-Trustee transfers. Both forms enable your existing broker to transfer your IRA funds by physical check or by wire transfer. Your IB account must be opened and approved before you begin transfer.

Under normal circumstances, the non-ACATS transfer methods should take between two to six weeks. The paper forms are available to print, complete, and mail to IB on our website by clicking IRA Rollover or Trustee-to-Trustee transfer.

If the other broker participates in the Automated Customer Account Transfer Service (ACATS) program, then contact your other broker to submit the transfer out electronically. All other outgoing IRA Rollover or Trustee-to-Trustee requests must be mailed to the address below.

Interactive Brokers LLC
Attn: Retirement Accounts, Transfers
209 South LaSalle Street, 10th Floor
Chicago, IL 60604

In most cases, there is no limit on the amount you may transfer or roll over into an IRA. You are simply moving the money from one type of retirement plan to another. You may transfer or roll over your IRA regardless of your age. However, if you are 70½ or older, you must receive a minimum required distribution from your IRA each year. This should be taken into account in planning your rollover.

Limits do apply to multiple rollover transactions. You may receive an IRA distribution and roll the funds into another IRA once during a twelve-month period. This rule applies to each IRA separately and begins on the date funds are received.

Yes, it is possible to consider a rollover of funds from your retirement plan directly into a Roth IRA. Any amount rolled over is subject to the same rules for converting a traditional IRA into a Roth IRA. Also, the rollover contribution must meet the rollover requirements that apply to the specific type of retirement plan.

Yes! Balances in a government 457(b) deferred compensation plans are eligible to roll into an IRA.

If you are self-employed and have set up your own self-directed retirement plan that offers investing flexibility, and have an independent administration firm which neither limits investment choices nor gives investment advice, this plan can be transferred into a retirement trust at IB through a Direct Rollover.

Yes, IB supports internal funds transfers for accounts with a matching Account Type, Account Title, and tax ID. Requests may be submitted on the Funds Transfers page in Account Management/Funds Management. For additional information, see Internal Funds Transfer.




Form 5498

Form 5498 reports your contributions, rollovers and the year-end fair market value.

Information on your Form 5498 is provided by your investment firm.

The reporting deadline for providing this to the IRS for the preceding tax year is May 31.

The IRS requires that this form be furnished to you by the trustee of your account by May 31 for the preceding tax year. To access and print your Forms 5498, log in to Account Management with your IB username and password.

  • If you're using the legacy Account Management version that has menus on the side, from the Report Management menu select Tax Forms.
  • If you're in Account Management version 2.0 with the menu along the top, select Reports and then select Tax Forms.

You have the right to request a date of death valuation. This service is available through Equity Trust. Please send a written request with a $40 check (service charge) directly to Equity Trust.




Form 5498-ESA

Form 5498-ESA reports contributions, rollovers, and transfers from other Coverdell Education Savings Accounts (ESA).

Information for your Form 5498-ESA came from information provided by your investment firm.

The reporting deadline for providing this information to the IRS is May 31 for the preceding tax year.

The IRS requires that this form be furnished to you by the trustee of your account for the preceding tax year by May 31. To access and print your Forms 5498, log in to Account Management with your IB username and password.

  • If you're using the legacy Account Management version that has menus on the side, from the Report Management menu select Tax Forms.
  • If you're in Account Management version 2.0 with the menu along the top, select Reports and then select Tax Forms.

If the total contributions made to all of your Coverdell ESAs exceed $2,000, you must withdraw the excess (plus earnings) by May 31 to avoid a penalty.